How to Negotiate a Line of Credit

Coard says the basics consist of three years’ of business tax returns and the business owner’s personal tax returns; three years’ of financial statements, including balance sheets (listing the company’s assets and liabilities); and income statements (listing revenues minus expenses to determine profit or loss). Some lenders will also request a statement of cash flow (charting movement of funds in and out).

What can business owners do to improve their chances? “Present a logical business plan that demonstrates their ability to repay the obligation,” says Hilson. “Maintain good financial controls, and don’t try to completely kill profits to manage taxes. Banks can’t lend on cash flows that don’t get formally reported.”

Here are five key areas loan officers will examine before granting you a line of credit.

How will a credit line help your business?

Lenders look at how the funds will be used, says Hilson. The most common uses include funding inventory, accounts receivable, and capital equipment. They’ll also look at what the business does—who does it sell to and buy from—as well as ask general questions about the company’s business model.

What are your annual net revenues?

You must prove that the business has lasting earning power, which means you’re generating net income. Yearlong monthly cash-flow statements will reflect this net income. Lenders like to see enough ongoing cash flow to cover all expenses, including the proposed loan payments, says Hilson. A seasonal lull can be reconciled, but a drastic drop in revenues year after year would cause concern.

How far out are your receivables?

Typically, a credit line is secured with accounts receivables. “We want to see current, detailed accounts receivable aging—a report listing accounts receivable owed from each of the company’s customers that indicate the number of days outstanding categorized as current, more than 30 days, 60 days, and 90 days,” says Coard. Based on eligible collateral, this report is often used to determine the limit of the line of credit. She says that most financial institutions will not include accounts receivable that are more than 90 days past due when determining the line of credit. In addition, if the company’s accounts receivable include what’s known as a concentration, meaning more than 20% of the total accounts receivable balance is due from one customer, the amount of the concentration may either be discounted or excluded from the eligible accounts receivable.

A memo to my friends at the City of Dallas and to our great Nation from a
black contractor

GREAT NEWS! Martin Luther Kings dream that we be judged by the content of
our character and not the color of our skin has become reality! Social
injustice is no more, Al Sharpton, Jesse Jackson.

In 10 years of being self employed, I feel compelled to thank America for
allowing me to experience the American dream. I founded my company at the
age of 28, 1996, with a Ford Probe and a mortgage on my first house. I
have no college degree and only had one year of construction experience in
1996, working for $6.00 an hour.

Read this:
In 1997, my company engaged in what was intended to be a large sidewalk
replacement contract with the City of Dallas. I was chosen by an African
American General Contractor, TEI Construction and Engineering, to
participate in this contract due to my minority status. I was given a
signed contract and proceeded out to sign 6 concrete subcontractors to
begin work on this wonderful contract. In a span of 3 months I billed TEI
for $268,000.00. I was paid $48,000.00. Then the payments stopped coming!
I pleaded with the owner, twice my age, telling him I had maxed out my
credit cards, paying my subcontractors for their completed work. I
informed him I did not want to file claims as he will loose his bond
privileges. Ego and pride prevailed and I was forced to file claims. What
a blow! (the bonding company and I would settle for $52,000.00 4 years
later)

TO THE RESCUE!
By 1998, looking at the big picture, I grudjingly paid the minimums on my
maxed out $5,000.00 limit credit cards, only to see my balances increase
each month. I decided to go to a bonding company, just me and my 1996 Ford
Probe, and apply for my own surety bond line. I had received a request for
bid from Plano Independent School District on an estimated $80,000.00
parking lot for Plano High School. With maxed out credit cards, a Ford
Probe as my company collateral, but evidence of what I had accomplished
with the City of Dallas through Dallas references, I was granted my first
surety bond line ($200,000.00 bond line) by the content of my character.
Praise Jesus!

I bid on and won the Plano parking lot. I carried out my first project to
perfection. I then went to Sherman, Tx. to buy my first true work truck, a
1996 Dodge dually. I was seduced into buying two 1996 Dodge Rams and a
1996 Ford Taurus, all white in color. The salesman sighted my credit was
that good! I left the dealership in a panic, thinking I may have gotten
over my head. By the grace of God, all three vehicles were paid off early!

By 1999, my bond line had jumped to $500,000.00, by the content of my
character. Toward the end of 1999, I won $600,000.00 in sidewalk contracts
with the City of Dallas. I went to Metro Ford in Dallas to buy my first
dump truck, brand new. I walked in with my check book expecting to pay
something down. Instead of asking me for a check, the dealer gave me the
keys and escorted me to my new truck. The dealer smiled and said, ”She’s
all yours, you’ll get your first bill in 6 weeks.” NOTHING DOWN! Based on
the content of my character.

The Dallas contracts were completed on time and to perfection. By this
time, my credit card debt was no more. I also bought a Bobcat front end
loader in 1999. I added some more work trucks and had a formidable amount
of business collateral.

By 2002, my company had grossed $2,700,000.00. I completed nearly
$900,000.00 with the City of Dallas with no discrepancies. Early that year
I received a phone call from a black janitorial contractor, Century
Services, out of Ft.Worth. He wanted to collaborate with me on bidding on
a City of Dallas sidewalk project on Skillman Road in Dallas because he
acknowledged I was an expert with the City of Dallas. I would engage in a
contract with an African American for the second time in my career. I
picked up the bid specs. from the City and filled out all the bid
documents including the unit items. He signed it and provided the surety
bond. We won the bid and set out to procure the project. By this time I
was five months in payments away from being paid off in full. It was
around this time I became deadly ill with a neural virus. My crew
completed the job with no discrepancies.

I was admitted into the hospital on Feb. 25, 2003, fearing for my life. I
had lost 80 lbs. I was released 8 days later. I called Lewis Johnson of
Century Services in reference to payment. I reminded him I needed at
least $5,000.00 to pay off my bobcat. He refused, not explaining why he
wouldn’t pay. I knew then the demon of envy, covetedness, pride and greed
had infiltrated his spirit. He perjured himself on a government document,
Form 8, of which I was the only contractor listed. He signed the document
claiming he had paid me $52,000.00. He never paid me a dime on this
$70,000.00 contract! It doesn’t end there, this man who cursed at me when
I told him God would not condone his actions is a minister!

The virus took me out for five months. Because I had no money to meet my
bills, I was forced to file bankruptcy. I lost all my equipment at my
storage facility and my dump truck which was a year away from being paid
off in full was repossessed as was my bobcat which was 5 months away from
being paid off, my first repossessions of my LIFE! An additional black
contractor blocked checks of $12,000.00 made out to me believing I would
pass away. I was too ill to file timely claims, so I gave it to God. I
asked the Lord to forgive him and bless him. In 2004, he filed for
bankruptcy as a sole proprietor which put him completely out of business.
Praise God for the corporate system which doesn’t effect my business.
However, the loss of all my equipment and the inability to qualify for
surety bonds, due to my bankruptcy, eliminates me from giving jobs to
minorities and black subcontractors.
Who’s keeping our people down? And who is going to get me out of this
mess? The same people who have chosen to walk the walk of the precepts
set forth by the spirit God over 400 years ago, the same spirit which
freed us in 1864, and gave us affirmative action and voting rights 100
years later. Unfortunately, What LBJ meant for good and compensation for
past discrimination has left us with no excuses.

The reason my spirit is so high is because in ten years of business at age
38 and more than $3,000,000.00 in gross sales, I’ve seen the change in
our culture regarding race.

White America has become apathetic to our complaints. They have done
everything they could to make amends for past transgressions even though
most weren’t around during the civil rights movement. We need to stop
being so cynical toward white America and understand we are the greatest
nation in the world because they have decided to walk the walk of their
faith in the last 40 years. We don’t want to believe it because it holds
us accountable.

I feel I owe white America a debt of gratitude for blessing me without any
transgressions in 10 years. This is because true Christians don’t covet.
They walk the walk. They don’t need our killings and our disrespect. But
they forgive us for our transgressions in hope of a changing environment.
A Christian attitude.

We talk the talk of Jesus Christ but we don’t walk the walk. We need to
get on our knees and thank God to be living in this environment. We are
not living for the right reasons. I work hard to make my wife proud of me
and so she can enjoy the American dream, (she’s from Germany)

We’ve grossed over $3,000,000.00 to date
I am thankful to America for helping pay off my house in North Garland in
5 years.
I am thankful to America for being voted 2003 Texas Businessman of the
Year by the NRCC in Washington D.C. by the content of my character
Invited to George Bushes 2004 Annual Dinner and attending by the content
of my character
Awarded the 2006 Merit Award by the content of my character.
I am thankful to America for being blessed to travel anywhere in the world
on a credit card because I was approved by my credibility and not my skin
color.
I traveled to Europe ever year since 1996. I’ve traveled to Cambodia twice
on mission trips, changing course on the way back home to run the beaches
of Cancun for a week at the exclusive five star Hotel. Oh no! Don’t tell
Al Sharpton. He proclaimed on national TV “We’re not free, no, we’re not
free!” This is our spiritual leader inciting anger and strife among the
masses.

If anything, we owe this country a debt of gratitude for allowing us to have the same freedoms as anybody else in this country, despite our social impotence!